Delinquencies Decline, Foreclosure Up Slightly in MBA 1Q Mortgage Delinquency Survey

Delinquency rates for mortgage loans fell in the first quarter, while foreclosure actions rose slightly, the Mortgage Bankers Association reported this morning.

The MBA First Quarter National Delinquency Survey reported the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.71 percent of all loans outstanding at the end of the first quarter, a decline nine basis points from the previous quarter and six basis points from a year ago.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The serious delinquency rate–the percentage of loans 90 days or more past due or in the process of foreclosure, fell to 2.76 percent, a decrease of 37 basis points from the fourth quarter and a decrease of 53 basis points from a year ago.

MBA said the percentage of loans on which foreclosure actions started during the first quarter rose to 0.30 percent, an increase of two basis points from the previous quarter but five basis points lower than one year ago. The percentage of loans in the foreclosure process at the end of the first quarter was 1.39 percent, down by 14 basis points from the fourth quarter and by 35 basis points than one year ago.

MBA Vice President of Industry Analysis Marina Walsh said the overall decrease in first quarter delinquencies were driven by a drop in both FHA and VA delinquency rates from the previous quarter, while the conventional delinquency rate held constant.

“Employment growth started 2017 on strong footing, with the economy adding 216,000 jobs in January 2017 and 232,000 jobs in February,” Walsh noted. “Average hourly wage growth increased 2.8 percent over the year, and has maintained a generally increasing trend since late 2015. These fundamentals have helped to support the performance of all loan types, whether FHA, VA or conventional loans.”

Walsh said the seasonally-adjusted FHA delinquency rate decreased to 8.09 percent from 9.02 percent in the fourth quarter, reaching its lowest level since 1997, reversing a fourth quarter increase. “Typically in the fourth quarter of any given year, we see a rise in delinquencies because of higher heating costs and holiday spending,” she said. “This increase is usually reversed in the first quarter. While MBA uses a seasonal adjustment model to mitigate these predictable seasonal effects, this particular six-month period showed larger than expected swings. First quarter results indicate that the increase in FHA delinquencies that we saw in the last quarter of 2016 has not been established as an ongoing trend.”

MBA also reported the VA delinquency rate dropped to 3.90 percent, from 4.00 percent in the fourth quarter. The conventional delinquency rate held steady at 4.04 percent.
“We saw an increase in foreclosure starts for the first time since the fourth quarter of 2014, but this increase was accompanied by a sizable drop in loans that were 90 days or more past due,” Walsh said. “It is likely that legacy distressed loans were held in the late stage-delinquency bucket by factors such as resolution attempts and state-specific requirements, before eventually going into foreclosure status. All 50 states and the District of Columbia saw a decrease in the 90-day or more delinquency rate.”

The report also noted nearly every state saw a decrease in the percentage of loans in foreclosure in the first quarter. The overall percentage of loans in the process of foreclosure was 1.39 percent, its lowest level since the first quarter of 2007. Additionally, the report said while judicial states still had more than three times the percent of loans in foreclosure as non-judicial states, that measure declined to the lowest level since the fourth quarter of 2007.

The NDS, conducted since 1953, covers 38 million loans on one- to four- unit residential properties. Loans surveyed were reported by more than 100 lenders, including mortgage bank, commercial banks and thrifts.